5 Takeaways For Valeant Investors As Ackman Exits


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This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.


Valeant Pharmaceuticals Intl Inc (NYSE:VRX) fell to a new 52-week low of $10.50 after Bill Ackman sold his stake.

Pershing Square, the activist investor's firm, exited its 27.2 million share position at $11. Ackman will also step off the company's board.

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David Maris of Wells Fargo reiterated his Underperform rating on the stock and the $11 sale price comes within his valuation range of $10-$13. Investors might consider Ackman’s exit as a sign Valeant may not see a major turnaround in the next several years.

“[W]e see this as a vote of no confidence for the stock and that things are continuing to go from bad to worse for Valeant,” Maris wrote in a note.

Maris said investors will take Pershing Square’s exit as a reflection that:

  • “The outlook is negative”
  • “The potential for meaningful near-term asset sales is unlikely”
  • “The legal proceedings/investigations may have greater risk than the Street is appreciating”
  • “A turnaround will take longer than expected or is not possible”
  • “The debt holders have an advantaged position in the capital structure, and as such the equity holders are at their mercy, especially in a bankruptcy situation.”

The analyst pointed out Valeant is in a challenging situation as it's set to launch an expensive-to-market drug into a crowded market with a worse-than-peers safety profile and weak core product trends.

The company is also burdened with several investigations and lawsuits and more than $29 billion of debt and obligations.

“We believe Valeant shares currently carry too much risk for us to be comfortable recommending them as an investment,” Maris added.

Related:

How Much Money Did Bill Ackman Lose In Valeant?

Pershing Square's Valeant Sale Sends 'Untimely Poor Signal'


27% profit every 20 days?

This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.


Posted In: Analyst ColorReiterationAnalyst RatingsBill AckmanDavid MarisPershing SquareWells Fargo